Arafura Resources Limited › ... · 2017-11-09 · Overview Arafura Resources Limited (ASX:ARU) November 2017 7 Secure Supplier of NdPr to Permanent Magnets Used in Clean Energy

Arafura Resources Limited

Evolution of a non-China NdPr Producer

International Rare Earths Conference- Hong KongNovember 2017

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Disclaimer

November 2017Arafura Resources Limited (ASX:ARU)

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Important Notice

This presentation has been prepared by Arafura Resources Limited (Arafura Resources). It is of a summary form only and therefore contains general backgroundinformation which may not be complete. It should be read in conjunction with and full review made of Arafura Resources’ disclosures and releases lodged with theAustralian Securities Exchange (ASX) and available at www.asx.com.au.

This presentation contains certain statements which may constitute “forward-looking statements.” Such statements are only expectations or beliefs and are subject toinherent risks and uncertainties which could cause actual values, results or performance achievements to differ materially from those expressed or implied in thispresentation. No representation or warranty, express or implied is made by Arafura Resources that any forward-looking statement contained in this presentation willoccur, be achieved or prove to be correct. You are cautioned against relying upon any forward-looking statement. Except for statutory liability which cannot beexcluded, each of Arafura Resources and its related body corporates and their officers, employees and advisers expressly disclaims any responsibility for the accuracy orcompleteness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be sufferedby any person as a consequence of any information in this presentation or any error in it or omission from it. Arafura Resources accepts no responsibility to update anyperson regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person, nor any obligation tofurnish the person with any further information.

This presentation does not constitute an offer of any securities in Arafura Resources, in any jurisdiction, nor an invitation to apply for such securities, in any jurisdiction.This presentation does not provide investment advice or financial product advice. You should obtain professional advice and carry out your own independentinvestigations and assessment of the information in this presentation (including any assumptions) before acting.

Information in this presentation which is attributed to a third-party source has not been checked or verified by Arafura Resources.

The information in this presentation that relates to Exploration Results or Mineral Resources is based on information compiled by Mr Kelvin Hussey BSc (Hons). MrHussey is a Member of the Australian Institute of Geoscientists and he has sufficient experience which is relevant to the style of mineralisation and type of deposit underconsideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting ofExploration Results, Mineral Resources and Ore Reserves (The JORC Code)”. Mr Hussey consents to the inclusion in this presentation of the matters based on hisinformation in the form and context in which it appears.

Mr Hussey is a full-time employee of Arafura Resources.For

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http://www.asx.com.au/

1. Investment Highlights & Project History

2. NdPr Market

3. Nolans Project

4. Project Timeline

5. Project Funding

6. Summary

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Arafura Resources Limited (ASX:ARU) November 2017

Programme

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• ASX listed company developing the Nolans Rare Earths Project in the NorthernTerritory, low geopolitical risk, 30+ year mining and chemical processing operation

• Nolans is one of the largest and richest deposits of Neodymium-Praseodymium (NdPr)rare earths in the world and its forecast operating costs are in the lowest quartile

• NdPr is the critical raw material used in the production of high-strength permanentmagnets used extensively in the automotive, clean energy, electronics and healthcaresectors

• Arafura has the capability of meeting 5-10% of global demand for NdPr

• Nolans has been afforded major project status by the Northern Territory and Australiangovernments

• Nolans is in advanced feasibility and environmental assessment

Investment Highlights & Capital Structure


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Top 5 Shareholders

JP Morgan Nominees 20.47%

ECE Nolans Investment Co 19.05%

HSBC Custody Nominees 2.59%

Citicorp Nominees 2.31%

BNP Paribas Nominees 0.85%

ASX Code ARU

Share Price (30-Oct-17) A$0.105

Issued Shares 575.8m

Market Cap A$60.5m

Cash (30-Sept-17) + Placement A$15.3m

Debt Nil

Enterprise Value A$45.2m

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Arafura Resources ASX: ARU

Volume (M) Price (AUD)

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Project History

2012

•Resource upgrade 47 m tonnes

•HCL pre-leach

•Demonstration scale

•Nameplate 20 ktpa TREO

2014

•Optimization & trade off study

•5 REO products Demonstration Scale

•Nolans Development Report H2SO4

pre- leach

•20 ktpa TREO

•Chinese technical involvement

2015

•Nolans Optimisation

•NT Government issues Terms of Reference EIS

•Resource upgrade to 56 m tonnes

2016

•Process & configuration Phosphoric Acid Pre-Leach

•Nolans Project 14 ktpa TREO

•110 ktpa 54% MGA

•MOU with OCI- RE separation toll process JV

•EIS submitted

2017

•Beneficiation pilot

•Phosphate extraction pilot

•Bulk pre-leach pilot

•Acid bake pilot ongoing

•Engineering deliverables

Nolans Project 2012

CAPEX A$1,912m

OPEXA$20.55/kg

TREO

Nolans Development 2014

CAPEX A$1,408m

OPEXA$15.67/kg

TREO

Nolans Optimization 2015

CAPEX A$1,193m

OPEXA$14.51/kg

TREO

H3PO4 Pre- leach 2016

CAPEX US$680m

OPEXUS$6.23/kg

TREO


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2018• Feasibility

Study• Final

Investment Decision

Nolans Project Expenditure

Exploration A$20m

Evaluation & Technology

A$125m

Total A$145m

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The NdPr Market


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Overview


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Secure Supplier of NdPr to Permanent Magnets Used in Clean Energy

• NdPr is a key component in the manufacture of high-strength NdFeB permanent magnetsused in electric vehicles (EVs), wind turbines, portable electronic devices, and manyindustrial applications

• EVs use approximately 1 kg NdPr per drivetrain. Incremental to other existing applications

• NdPr accounts for 26.4% of Nolans rare earths composition by volume and 85% by value

• China has generally controlled the production of NdPr but recently analysts are forecastingfor China to become a net importer

• Structural changes are being implemented in China to weed out illegal operators, closeunsustainable operations, and push bigger players to consolidate.

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NdPr Price – Supply & Environmental Reform


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• Enforced closure of illegaland unsustainable mines andsmelting

• China “big 6” consolidationcreates a more sophisticatedsupply chain

• Improved chain of custodyfor NdPr supply

• China rehabilitation costs yetto be realised

• Supply initiatives havepositively impacted NdPrprice in 2017

• Emerging demand for NdFeBmagnets may also impactdemand- supply balance

Source: Independent price reporting agency

$35.0

$40.0

$45.0

$50.0

$55.0

$60.0

$65.0

$70.0

$75.0

$80.0

$85.0

NdPr Oxide Pricing 2015-2017NdPr Oxide

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Emerging Demand Dynamic


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• Steady increases in global magnet production 2014 to 2016, NdPr price movement indicatescontinued growth for 2017, production growth dominated by China

• To maintain magnet production growth China will require increased volumes of NdPr rawmaterials, which conflicts with contracting NdPr production

• China’s domestic magnet consumption is increasing as it pursues clean energy objectives, if NdPrfeedstock is not expanding China exports may be impacted

• Will illegally produced NdPr continue to keep supply and demand balanced?

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20,000

40,000

60,000

80,000

100,000

120,000

140,000

2011 2012 2013 2014 2015 2016

Global Magnet Production

China Japan Europe

62%

63%

64%

65%

66%

67%

68%

69%

70%

71%

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20,000

40,000

60,000

80,000

100,000

120,000

2011 2012 2013 2014 2015 2016

China Magnet Production

Export Domestic Domestic %

Source: ACREI, Argus Metals and industry sources

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Demand Growth- China a net importer?


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• China 2025 Strategy- integration and movement along the supply chain

• China pursuing global leadership in EV manufacture, as a priority

• Commercial Activity and expansion of non- China NdPr supply;

• China RE producers are now looking to foreign assets to expand production (ASX:GGG; ASX:NTU)

• China backed syndicate places winning bid to acquire Mountain Pass assets

• Noble Resources acquires 14.5% of Mkango– Malawi focused RE development

• Rainbow RE, Gakara project in Burundi-Thyssenkrupp mineral concentrate offtake

• Nolans to provide meaningful NdPr oxide production in the lowest cost quartile, high NdPr enrichment and advanced project development status

Source: ACREI, Adamas Intelligence, corporate filings and presentations, IMCOA, rare earth end users, Roskill

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50,000

100,000

150,000

200,000

250,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Magnet Demand China and ROW

China ExportEuropeJapanChina DomesticChina NdPr Oxide - Magnet Capacity (legal)China NdPr Oxide - Magnet Capicity (legal & illegal) 2016

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The Nolans Project


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Project Configuration


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Close To Key Infrastructure


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• Stuart Hwy – 10 km east

• Alice Springs railyard, airport and other services –135 km south

• Amadeus gas pipeline –adjacent to processing site

• Water supply – 30 km south

• Tailings and process wastes remain at site

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Project Metrics


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• Ultra competitive operating costs US$6.23/kg TREO or US$24.38/kg NdProxide – lowest amongst peers

• Phosphoric acid recovered to reduce commodity risk

• Flowsheet targets high NdPr

Refer Arafura ASX release 7 June 2017 for additional and qualifying information on the Mineral Resources that underpin the production target and provides the material assumptions on which the production target is based

The Company confirms that all material assumptions underpinning the forecast financial information derived from its 14,000 tpa TREO production target and the production target itself, continue to apply and have not materially changed since the 7 June 2017 ASX release

Based on 14,000 tpa TREO production processing Measured and Indicated Mineral Resources as per appendix AF

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Pilot Scale Work Completed In 2017


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High-Phosphate Concentrate

Beneficiation Pilot Plant Phosphoric Acid Regeneration Circuit

Rare Earth & Phosphoric Acid Products

Bulk Pre-Leach Pilot Plant

NdPr-Rich Pre-Leach Residue

TREO Grade 7.0%

TREO Recovery >80%

NdPr Oxide Grade 1.8%

NdPr Oxide Recovery >82%

P2O5 Grade 29%

P2O5 Recovery >90%

Al2O3 Grade <3.2%

Fe2O3 Grade <1.9%

Mass Pull 55%

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Remaining Piloting Activities 2017-18


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Cooled Sulphated Product

PLR and Acid Mixing Acid Bake

Phase 5,6,7 planningAcid Bake Phase 4 commenced

Water Leach Liquor

Baked Mixture Feeding

RE Purification and Precipitation pilot

Phase 5

RE Dissolution and Crystallization pilot

Phase 6

RE Separation pilot

Phase 7

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Piloting & Final Feasibility


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2018 Targets

• Finalisation of piloting

• Environmental Approvals

• Advance offtake arrangements

• Completion of definition stage engineering and DFS

• Engage with strategic partners for capital equipment & project funding

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• NdPr production requires downstream chemical processing, significant supporting infrastructure and compliant waste management

• New NdPr project capital intensity range- US$30 -50M per kt REO. Drivers include; location, scale, OPEX, RE product produced and by products

• NdPr is not exchange traded, pricing risk will be assessed as high by banks

• Arafura actions to reduce funding requirement - BOOT, equipment financing, JV for toll RE separation, project level investment and leveraging the strategic significance NdPr

NdPr Project Funding


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• Export Credit Agencies (ECA) will be key to providing government backed funding and guarantees, leveraged against the strategic link of NdFeBmagnet production

• ECA funding linked to offtake arrangements, capital equipment supply and construction

• ECA linked project finance will be catalyst to attract equity at corporate and/ or project level

Nolans Funding Strategy


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Offtake & Procurement

•Offtake contract- long term

•Capital Equipment Procurement

Export Credit Agency

•Funding and guarantees linked to offtake & procurement

•Long life

•Ultra low OPEX

•Low sovereign risk

Commercial Bank

•Long life project

• strong cashflow

•Offtake/ ECA – reduced market & credit risk

Project Equity

•Debt finance is a significant enabler

•Lower market risk

•Lower funding risk

•Market & technical Validation

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Summary


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Attribute Arafura

High growth and high value NdPr magnet focus ✓

NdPr production planned to coincide with projected supply gap ✓

Located in a jurisdiction with low geopolitical risk and with strategic support ✓

Long-life, low-risk resource with planned output that supports >30 years of production ✓

Close to vital transport, energy and water infrastructure ✓

Efficient, high recovery flowsheet proven from mine to market: final piloting phase

commenced✓

Regulatory approvals well advanced: environmental, water, Native Title ✓

Lowest production cost to remain competitive in a cyclical downturn ✓For

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Contact:Level 3, 263 Adelaide TerracePerth, WA, 6000, AustraliaT: +61 8 6210 7666E: [email protected]

Corporate PresentationNovember 2017

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Appendix A: Mineral Resources


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RESOURCES TONNES M RARE EARTHS TREO % PHOSPHATE P2O5 % NdPr Enrichment %

Measured 4.9 3.2 13 26.1

Indicated 30 2.7 12 26.4

Inferred 21 2.3 10 26.5

TOTAL 56 2.6 11 26.4

1% TREO cut-off grade. Numbers may not compute exactly due to rounding. “NdPr enrichment“ is the proportion of TREO comprising Nd2O3 and Pr6O11.

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Appendix B: Environmental Assessment In Progress


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Remaining steps in Northern Territory Environmental Impact Assessment process

No major risks identified

Draft EIS submitted May 2016 EIS Supplement submitted February 2017

Public and government review May-August 2016609 comments from 20 stakeholder groupsFor

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Documents

Arafura Resources Limited › ... · 2017-11-09 · Overview Arafura Resources Limited (ASX:ARU) November 2017 7 Secure Supplier of NdPr to Permanent Magnets Used in Clean Energy